back in my cisco days, the 'cloud' was in fact the internet... when you were drawing the model of a network, you drew a 'cloud' symbol to represent the internet... you did this, because you naturally had no freaking clue as to what hardware the packet could travel through while bouncing around the internet, so the term 'cloud' kinda represented that jumbled mess...
an issue that is common with servers nowadays is load balancing... if a thousand people hit your website at once, and they all get sent to the same server, that server is gonna get slammed and your other servers may not even get touched... one way of alleviating this is with virtualization... you have one beefy server with several virtual os installs on it... the virtual os's act as individual servers so on a software layer it would look like 5 servers when actually with hardware it's only one... if one of these virtual servers gets slammed, resources are then allocated to it, stolen from the other virtual servers that aren't utilizing all of theirs... this works well, but it would be best if things could scale across hardware...
thus 'cloud' networks... this is essentially a software layer that is capable of scaling across hardware... in theory, it would be like going into task manager and seeing 64 processors and explorer showing 100TB of space and your computer successfully utilizing all of that, but on the hardware side it is really just several networked machines...
i haven't seen any 'real' cloud networks, but what i've seen of current implementations focus on resource management... it's like if your pc was connected to a cluster of servers, and your os was capable of sending tasks directly to the hardware in the cluster and managing usage at the same time... so it could send computational tasks to one server, and if the resource manager notices that server is reaching its max potential it could start sending tasks to a second server as well... naturally you'd want to balance it across all the servers...
when people say 'in the cloud'... like storing something 'in the cloud'... they really just mean on their servers... unfortunately, this usage is what causes all the confusion of the term 'cloud'... in a way, they are saying that everything outside of the current users network, the internet and beyond, is being bundled into the term 'cloud'... from a users perspective, ya, you don't have any idea of the structure of the network outside of your own... so it's kinda correct, except that it's those who 'own' the network you are storing on or running the stuff from who are also calling their 'own' network a cloud, which is kinda weird and incorrect... they are more than likely 'not' running a cloud networking solution... currently most 'cloud' computing networks are being used for highly computational scientific tasks... they aren't storing your game saves or your emails... these are on the run of the mill standard networks... so why even call it 'cloud'?? why not just say 'server storage' or 'server applications'... cuz it's a buzz word... and, well, we've had server storage and server applications for some time now... 'cloud' makes it sound all shiny and new, add in the confusion with actual 'cloud' networks and you've got people all foggy, like their head's in 'the cloud'...